# TransUnion: Form 10-Q/A for the period ended Sep 30, 2023 - Company: [TransUnion](/companies/tru.md) (CIK 1552033) - Form: 10-Q/A - Filed: 2024-01-11 - Accepted by EDGAR: Jan 11, 2024, 16:17 ET - Period: 2023-09-30 - Accession: 0001552033-24-000009 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1552033/000155203324000009/tru-20230930.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1552033/000155203324000009/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2023-07-01 to 2023-09-30 | $968.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.88bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $314.8m | us-gaap:SellingGeneralAndAdministrativeExpense | | Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $931.3m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$236.3m | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2023-01-01 to 2023-09-30 | $67.3m | us-gaap:OperatingIncomeLoss | | Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $72.7m | us-gaap:InterestExpense | | Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $217.2m | us-gaap:InterestExpense | | Income tax | 3 months, 2023-07-01 to 2023-09-30 | $22.2m | us-gaap:IncomeTaxExpenseBenefit | | Income tax | 9 months, 2023-01-01 to 2023-09-30 | $60.1m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2023-07-01 to 2023-09-30 | −$318.8m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2023-01-01 to 2023-09-30 | −$212.2m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.65 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.10 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.65 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.10 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 193,400,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 193,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $443.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $213.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $61.4m | us-gaap:PaymentsOfDividendsCommonStock | | Cash and equivalents | at 2023-09-30 | $420.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-09-30 | $1.40bn | us-gaap:AssetsCurrent | | Total assets | at 2023-09-30 | $11.10bn | us-gaap:Assets | | Current liabilities | at 2023-09-30 | $911.1m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-09-30 | $6.99bn | us-gaap:Liabilities | | Long-term debt | at 2023-09-30 | $5.25bn | us-gaap:LongTermDebtNoncurrent | | Current portion of debt | at 2023-09-30 | $114.6m | us-gaap:DebtCurrent | | Shareholders' equity | at 2023-09-30 | $4.01bn | us-gaap:StockholdersEquity | | Shares outstanding | at 2023-09-30 | 193,700,000 shares | dei:EntityCommonStockSharesOutstanding | ## Management's discussion and analysis As filed, 89,450 characters. The following discussion and analysis of TransUnion’s financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, TransUnion’s audited consolidated financial statements, the accompanying notes, “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022, as well as the unaudited consolidated financial statements and the related notes presented in Part I, Item 1, of this Amendment No. 1 to Quarterly Report on Form 10-Q/A. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in “Cautionary Notice Regarding Forward-Looking Statements,” and Part II, Item 1A, “Risk Factors.” References in this discussion and analysis to the “Company,” “we,”, “us,” and “our” refer to TransUnion and its direct and indirect subsidiaries, including TransUnion Intermediate Holdings, Inc., collectively. ### Overview TransUnion is a leading global information and insights company that makes trust possible between businesses and consumers, working to help people around the world access opportunities that can lead to a higher quality of life. That trust is built on TransUnion’s ability to deliver safe, innovative solutions with credibility and consistency. We call this Information for Good. Grounded in our heritage as a credit reporting agency, we have built robust and accurate databases of information for a large portion of the adult population in the markets we serve. We use our data fusion methodology to link and match an increasing set of disparate data to further enrich our database. We use this enriched data, combined with our expertise, to continuously develop more insightful solutions for our customers, all in accordance with global laws and regulations. Because of our work, organizations can better understand consumers in order to make more informed decisions, and earn consumer trust through great, personalized experiences, and the proactive extension of the right opportunities, tools and offers. In turn, we believe consumers can be confident that their data identities will result in better offers and opportunities. We provide solutions that enable businesses to manage and measure credit risk, market to new and existing customers, verify consumer identities, mitigate fraud, and effectively manage call center operations. Businesses embed our solutions into their process workflows to deliver critical insights and enable effective actions. Consumers use our solutions to view their credit profiles and access analytical tools that help them understand and manage their personal financial information and take precautions against identity theft. Our solutions are based on a foundation of data assets across financial, credit, alternative credit, identity, phone activity, digital device information, marketing, bankruptcy, lien, judgment, insurance claims, automotive and other relevant information obtained from thousands of sources including financial institutions, private databases and public records repositories. Our addressable market includes the global data and analytics market, which continues to grow as companies around the world increasingly recognize the benefits of data and analytics-based decision making, and as consumers recognize the important role that their data identities play in their ability to procure goods and services. We leverage our differentiated capabilities in order to serve a global customer base across multiple geographies and industry verticals. ### Restatement The Company has restated its previously issued Consolidated Financial Statements and related notes for the three and nine months ended September 30, 2023. Refer to Note 1, “Significant Accounting and Reporting Policies” in the Notes to the Consolidated Financial Statements for additional information. Management’s Discussion and Analysis of Financial Condition and Results of Operations has not been substantively amended, updated, or changed from the disclosures and analysis included in the Original Q3 2023 10-Q except to update amounts impacted by the restatement. The following sections within Management’s Discussion and Analysis of Financial Condition and Results of Operations have been updated to reflect the restatement: “Developments that Impact Comparability Between Periods,” “Results of Operations,” “Non-GAAP Measures,” and “Application of Critical Accounting Estimates.” ### Segments We manage our business and report our financial results in three reportable segments: U.S. Markets, International and Consumer Interactive. See Part I, Item 1 “Notes to Unaudited Consolidated Financial Statements,” Note 17, “Reportable Segments” for additional information. ### U.S. Markets The U.S. Markets segment provides consumer reports, actionable insights and analytics to businesses. These businesses use our services to acquire customers, assess consumers’ ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and mitigate fraud risk. The core capabilities and delivery methods in our U.S. Markets segment allow us to serve a broad set of customers across industries. ### International The International segment provides services similar to our U.S. Markets segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics and solutions services, and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections, and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment that help consumers proactively manage their personal finances and take precautions against identity theft. ### Consumer Interactive The Consumer Interactive segment provides solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include paid and free credit reports, scores and freezes, credit monitoring, identity protection and resolution, and financial management for consumers. The segment also provides solutions that help businesses respond to data breach events. Our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive segment serves consumers through both direct and indirect channels. ### Corporate In addition, Corporate provides support services for each of the segments, holds investments, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature. ### Factors Affecting Our Results of Operations The following are certain key factors that affect, or have recently affected, our results of operations: ### Macroeconomic and Industry Trends Our revenues and results of operations have been and can be significantly influenced by general macroeconomic conditions, including but not limited to, interest rates, inflation, housing demand, the availability of credit and capital, employment levels, and consumer confidence. During the first nine months of 2023, the U.S. labor market remained steady with low unemployment and rising real wages. However, subsiding but still elevated inflation, high energy prices, and continued interest rate increases by the Federal Reserve have all contributed to constrained economic activity. In addition, liquidity challenges within the banking sector, a slowing housing market, lower GDP growth, softening consumer confidence and global geopolitical events, all added to the deterioration of global macroeconomic conditions and increasing recession fears compared with the post-pandemic rebound of 2021 and 2022. These slowing macroeconomic conditions had a more pronounced impact in our developed markets, including the U.K., compared with our emerging markets. The U.K. is experiencing persistently unfavorable and worsening macroeconomic conditions, including rising interest rates, inflation pressures, and a slowing labor market. In addition, the impact of exchange rates had a continuing significant impact on our International segment. The impact of higher interest rates has slowed demand for consumer loans and auto loans, and has been particularly acute in the housing sector, where higher borrowing rates significantly impacts both home affordability, driving down purchase activity, and demand for mortgage loan refinancing. The impact of higher interest rates on slowing aggregate demand is expected to result in increased unemployment levels over the next year, which is likely to reduce consumer credit activity. These dynamics impact the comparability of our results of operations, including our revenue and expense, between the periods presented below. The ongoing uncertainty and the unpredictable nature of the macroeconomic environment could have a material adverse impact on various aspects of our business in the future, including our stock price, results of operations and financial condition, including the carrying value of our long-lived assets such as goodwill and intangible assets. ### Effects of Inflation We believe that inflation has had and we expect will continue to have a negative impact on our business and results of operations, including decreased demand for our services resulting from the Federal Reserve and other central banks continuing to raise interest rates to combat inflation, slowing consumer spending on non-essential goods and services, and consequently lower demand for credit. The impact of elevated but subsiding levels of inflation and the resulting response by the Federal Reserve and other central banks to raise interest rates could have a material adverse impact on various aspects of our business in the future. ### Developments that Impact Comparability Between Periods The following developments impact the comparability of our balance sheets, results of operations and cash flows between periods: During the third quarter of 2023, we identified a triggering event for goodwill impairment testing purposes in our United Kingdom reporting unit as discussed in Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 5, “Goodwill.” As a result of the triggering event, we recorded a goodwill impairment of $414.0 million (as restated) in the third quarter of 2023. In each of the first three quarters of 2023, we prepaid $75.0 million, and during the quarters ended December 31, 2022 and March 31, 2022, we prepaid $200.0 million and $400.0 million, respectively, of our Senior Secured Term Loan B-6, funded from cash-on-hand. These transactions affect the comparability of interest expense between 2023 and 2022, as further discussed in “Results of Operations – Non-Operating Income and (Expense) – Interest Expense” below. On November 16, 2022, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. These swaps replaced other swaps that expired in December 30, 2022. The swaps commenced on December 30, 2022, and expire on December 31, 2024, with a current aggregate notional amount of $1,305.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 4.3380% and 4.3870% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges. On April 12, 2022, after failed settlement negotiations with the Consumer Financial Protection Bureau (“CFPB”) regarding a certain regulatory matter, the CFPB filed a lawsuit against us, Trans Union LLC, TransUnion Interactive, Inc. and our former President of Consumer Interactive. During the first quarter of 2022, we recorded an incremental $29.5 million of expense related to this matter. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 18, “Contingencies,” for further information about this matter. On April 8, 2022, we acquired 100% of the equity of the entities that comprised Verisk Financial Services (“VF”). We retained the leading core businesses of Argus, and divested the remaining non-core businesses on December 30, 2022. The results of operations of Argus are included in the U.S. Markets segment in our consolidated statements of income since the date of the acquisition. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 2, “Business Acquisition,” and Note 3, “Discontinued Operations,” for additional information. ### Key Components of Our Results of Operations ### Revenue We report revenue for our three reportable segments, U.S. Markets, International and Consumer Interactive. Within the U.S. Markets segments, we report and disaggregate revenue by vertical, which consists of our Financial Services vertical and Emerging vertical. Revenue from our acquisition of Argus is included in the Financial Services vertical. Within the International segment, we disaggregate revenue by regions, which consists of Canada, Latin America, the United Kingdom, Africa, India, and Asia Pacific. For our Consumer Interactive segment, we do not disaggregate revenue. ### Cost of Services Costs of services include data acquisition and royalty fees, personnel costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses and occupancy costs associated with the facilities where these functions are performed. ### Selling, General and Administrative Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions. ### Non-Operating Income and Expense Non-operating income and expense includes interest expense, interest income, earnings from equity-method investments, dividends from cost-method investments, fair-value adjustments of equity-method and Cost Method Investments, if any, expenses related to successful and unsuccessful business acquisitions, loan fees, debt refinancing expenses, certain acquisition-related gains and losses and other non-operating income and expenses. ### Results of Operations —Three and Nine Months Ended September 30, 2023 and 2022 For the three and nine months ended September 30, 2023 and 2022, our results of operations were as follows: | | Three months ended September 30, (As Restated) 2023 | 2022 | Change 2023 vs. 2022 | 2023 | Nine months ended September 30, (As Restated) | 2022 | Change 2023 vs. 2022 $% | | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | **Revenue** | $968.7 | $938.2 | $30.4 | 3.2% | $2,876.9 | $2,807.8 | $69.1 | 2.5% | | **Operating expenses** | | | | | | | | | | Cost of services (exclusive of depreciation and amortization below)1 | 344.8 | 338.2 | 6.6 | 2.0% | 1,073.2 | 988.2 | 85.0 | 8.6% | | Selling, general and administrative1 | 314.8 | 301.0 | 13.8 | 4.6% | 931.3 | 943.6 | (12.3) | (1.3)% | | Depreciation and amortization | 131.3 | 129.6 | 1.8 | 1.4% | 391.1 | 389.0 | 2.1 | 0.6% | | Goodwill impairment | 414.0 | — | 414.0 | nm | 414.0 | — | 414.0 | nm | | **Total operating expenses** | 1,205.0 | 768.8 | 436.2 | 56.7% | 2,809.6 | 2,320.8 | 488.8 | 21.1% | | **Operating income (loss)** | (236.3) | 169.5 | (405.8) | nm | 67.3 | 487.0 | (419.7) | (86.2)% | | **Non-operating income and (expense)** | | | | | | | | | | Interest expense | (72.7) | (61.3) | (11.4) | 18.6% | (217.2) | (163.4) | (53.8) | 32.9% | | Interest income | 5.0 | 1.1 | 3.8 | nm | 15.1 | 3.1 | 12.0 | nm | | Earnings from equity method investments | 3.7 | 3.5 | 0.1 | 3.6% | 11.7 | 9.7 | 2.0 | 20.6% | | Other income and (expense), net | 8.7 | (2.0) | 10.7 | nm | (16.3) | (20.2) | 3.9 | (19.2)% | | **Total non-operating income and (expense)** | (55.4) | (58.7) | 3.3 | (5.6)% | (206.8) | (170.9) | (35.9) | 21.0% | | **Income (loss) from continuing operations before income taxes** | (291.7) | 110.8 | (402.5) | nm | (139.5) | 316.1 | (455.6) | nm | | **Benefit (provision) for income taxes** | (22.2) | (30.6) | 8.3 | (27.3)% | (60.1) | (84.1) | 24.0 | (28.6)% | | **Income (loss) from continuing operations** | (313.9) | 80.3 | (394.2) | nm | (199.6) | 232.0 | (431.5) | nm | | **Discontinued operations, net of tax** | (0.5) | 2.4 | (2.9) | nm | (0.7) | 2.3 | (3.1) | nm | | **Net income (loss)** | (314.4) | 82.7 | (397.1) | nm | (200.3) | 234.3 | (434.6) | nm | | **Less: net income attributable to noncontrolling interests** | (4.3) | (3.5) | (0.8) | 23.1% | (11.9) | (11.3) | (0.6) | 5.6% | | **Net income (loss) attributable to TransUnion** | $(318.8) | $79.2 | $(398.0) | nm | $(212.2) | $223.0 | $(435.3) | nm | #### nm: not meaningful *As a result of displaying amounts in millions, rounding differences may exist in the table above.* 1\. We revised prior period Consolidated Statements of Income to correct the classification of certain employee related expenses between cost of services and selling, general and administrative. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,” and Note 19, “Revision of Previously Issued Financial Statements.” ### Revenue For the three months ended September 30, 2023, revenue increased $30.4 million, or 3.2%, compared with the same period in 2022, due primarily to growth in our International and U.S. Markets segments, partially offset by a decrease in our Consumer Interactive segment. For the nine months ended September 30, 2023, revenue increased $69.1 million, or 2.5%, compared with the same period in 2022, due primarily to a 0.7% increase from our recent acquisition in the U.S. Markets segment and organic growth in our International and U.S. Markets segments, partially offset by a decrease in our Consumer Interactive segment and a decrease from the impact of foreign currencies. ### Operating Expenses We revised prior period Consolidated Statements of Income to correct the classification of certain employee related expenses between cost of services and selling, general and administrative. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,” and Note 19, “Revision of Prior Period Financial Statements.” #### Cost of Services Cost of services increased $6.6 million and $84.8 million for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The increase in the three-month period was due primarily to: - an increase in variable product costs resulting from the increase in revenue in our U.S. Markets; and - an increase in costs from our accelerated technology investment, partially offset by: - a decrease in various other costs due to cost initiatives. The increase in the nine-month period was due primarily to: - an increase in variable product costs resulting from the increase in revenue in our U.S. Markets; - an increase in costs from our accelerated technology investment; and - an increase in operating costs in the first quarter from our April 2022 acquisition in our U.S. Markets segment, partially offset by: - the impact of foreign currencies on the expenses of our International operations. #### Selling, General and Administrative Selling, general and administrative expenses increased $13.9 million and decreased $12.1 million for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The increase in the three-month period was due primarily to: - a net increase in labor costs, including an increase in stock-based incentive compensation and a decrease in cash-based incentive compensation, partially offset by: - a decrease in advertising expense; and - a decrease in integration-related costs for our 2021 and 2022 acquisitions in our U.S. Markets and Consumer Interactive segments. The decrease in the nine-month period was due primarily to: - a decrease in certain legal and regulatory expenses; - a decrease in integration-related costs for our 2021 and 2022 acquisitions in our U.S. Markets and Consumer Interactive segment; - a decrease in advertising expense, primarily in our Consumer Interactive segment; and - the impact of foreign currencies on the expenses of our International segment, partially offset by: - a net increase in labor costs, including an increase in stock-based incentive compensation and a decrease in cash-based incentive compensation; and - an increase in operating costs in the first quarter from our April 2022 acquisition in our U.S. Markets segment. #### Depreciation and Amortization Depreciation and amortization increased $1.8 million and $2.1 million for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. #### Goodwill impairment During the three months ended September 30, 2023, we identified a triggering event related to our United Kingdom reporting unit. As a result of the triggering event, we performed a quantitative impairment test for the United Kingdom reporting unit. The quantitative test indicated that the carrying value of the reporting unit exceeded its fair value, resulting in a partial goodwill impairment of $414.0 million (as restated) that we recorded in the third quarter of 2023. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 5, “Goodwill,” for additional information. ### Non-Operating Income and Expense #### Interest expense In each of the first three quarters of 2023, we prepaid $75.0 million, and during the quarters ended December 31, 2022 and March 31, 2022, we prepaid $200.0 million and $400.0 million, respectively, of our Senior Secured Term Loan B-6, funded from cash-on-hand. The interest rate on our debt is variable and based on Term SOFR. Approximately 73.3% of this debt is hedged with interest rate swaps. These factors impact the comparability of interest expense between periods. Our future interest expense could be materially impacted by changes in our variable interest rates to the extent our variable rate debt is not hedged, additional borrowings, or additional prepayments. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt,” for additional information about our debt. For the three and nine months ended September 30, 2023, interest expense increased $11.4 million and $53.8 million, respectively, compared with the same periods in 2022. This increase was due to the impact of an increase in the average periodic variable interest rate on the unhedged portion of our debt, partially offset by a decrease in outstanding principal balance due to the prepayments made in 2022 and 2023. #### Interest income For the three and nine months ended September 30, 2023, interest income increased $3.8 million and $12.0 million, respectively, compared with the same periods in 2022. This increase was due to interest earned on the note receivable discussed in Note 16, “Fair Value,” and the increase in interest rates. #### Other income and (expense), net Other income and (expense), net includes acquisition fees, loan fees, and various other income and expenses. *(in millions)* | Other income and (expense), net: | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change | | --- | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | | Acquisition fees | $(1.7) | $(3.4) | $1.7 | (50.0)% | $(5.5) | $(21.4) | $15.9 | (74.3)% | | Loan fees | (1.3) | (0.4) | (0.9) | nm | (4.5) | (7.7) | 3.2 | (41.6)% | | Other income (expense), net | 11.7 | 1.8 | 9.9 | nm | (6.3) | 8.9 | (15.2) | nm | | Total other income and (expense), net | $8.7 | $(2.0) | $10.7 | nm | $(16.3) | $(20.2) | $3.9 | (19.3)% | #### nm: not meaningful *As a result of displaying amounts in millions, rounding differences may exist in the table above.* #### Acquisition fees Acquisition fees represent costs we have incurred in each period for various acquisition-related efforts, and include costs related to our acquisition of Argus in 2022. #### Loan fees Loan fees include deferred financing fees written off as a result of prepayments made on our debt. During the three and nine months ended September 30, 2023, we prepaid $75.0 million and $225.0 million, respectively, of our Senior Secured Term Loan B-6, funded from our cash-on-hand. As a result, during the three and nine months ended September 30, 2023, we expensed $1.0 million and $3.1 million of our unamortized original issue discount and deferred financing fees. During the nine months ended September 30, 2022, we prepaid $400.0 million of our Senior Secured Term Loan B-6, funded from our cash-on-hand. As a result, for the nine months ended September 30, 2022, we expensed $6.5 million of our unamortized original issue discount and deferred financing fees. #### Other income and (expense), net The three months ended September 30, 2023 includes a $11.7 million adjustment to the fair value of a put option liability related to a minority investment, currency remeasurement gains and losses, dividends received from Cost Method Investments, and other miscellaneous non-operating income and expense items. The nine months ended September 30, 2023 includes a $9.1 million loss on the impairment of a Cost Method Investment, a $6.2 million adjustment to the fair value of a put option liability related to a minority investment, gains and losses on other Cost Method investments, currency remeasurement gains and losses, dividends received from Cost Method Investments, and other miscellaneous non-operating income and expense items. ### Provision for Income Taxes For the three months ended September 30, 2023, we reported an effective tax rate of (7.6)%, which was lower than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of non-deductible goodwill impairment. For the three months ended September 30, 2022, we reported an effective tax rate of 27.6%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to increases in valuation allowances, nondeductible expenses in connection with executive compensation limitations, non-U.S. return-to-provision adjustments and other rate-impacting items, partially offset by benefits from the foreign rate differential, which includes the cumulative effect of a legal entity restructuring implemented in the third quarter and the research and development credit. For the nine months ended September 30, 2023, we reported an effective tax rate of (43.1)%, which was lower than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of non-deductible goodwill impairment. For the nine months ended September 30, 2022, we reported an effective tax rate of 26.6%, which was higher than the 21.0% U.S. federal corporate statutory rate due primarily to nondeductible expenses in connection with certain legal and regulatory matters and executive compensation limitations, increases in valuation allowances and other rate-impacting items, partially offset by excess tax benefits on stock-based compensation, benefits from the research and development credit, and benefits from the foreign rate differential, which includes the cumulative effect of a legal entity restructuring implemented in the third quarter. ### Segment Results of Operations—Three and Nine Months Ended September 30, 2023 and 2022: Management, including our chief operating decision maker (“CODM”), evaluates the financial performance of our businesses based on revenue and segment Adjusted EBITDA. For the three and nine months ended September 30, 2023 and 2022, our segment revenue, segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were as follows: *(in millions)* | Revenue: U.S. Markets gross revenue | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Financial Services | $322.6 | $323.3 | $(0.7) | (0.2)% | $975.1 | $958.6 | $16.5 | 1.7% | | Emerging Verticals | 310.9 | 297.8 | 13.1 | 4.4% | 920.9 | 895.8 | 25.1 | 2.8% | | U.S. Markets gross revenue | $633.5 | $621.1 | $12.4 | 2.0% | $1,896.1 | $1,854.4 | $41.6 | 2.2% | | International: | | | | | | | | | | Canada | $36.7 | $32.4 | $4.3 | 13.3% | $103.1 | $96.2 | $7.0 | 7.2% | | Latin America | 30.9 | 28.6 | 2.4 | 8.2% | 89.4 | 85.3 | 4.0 | 4.7% | | United Kingdom | 49.8 | 48.5 | 1.3 | 2.6% | 146.0 | 154.5 | (8.5) | (5.5)% | | Africa | 15.2 | 15.5 | (0.4) | (2.3)% | 44.3 | 45.9 | (1.6) | (3.6)% | | India | 56.1 | 44.4 | 11.7 | 26.4% | 161.8 | 129.8 | 32.0 | 24.7% | | Asia Pacific | 22.3 | 19.8 | 2.5 | 12.8% | 65.6 | 55.7 | 9.9 | 17.7% | | International gross revenue | $211.0 | $189.2 | $21.8 | 11.5% | $610.1 | $567.4 | $42.7 | 7.5% | | Consumer Interactive | $143.1 | $147.3 | $(4.2) | (2.9)% | $429.4 | $444.3 | $(14.9) | (3.3)% | | **Total gross revenue** | $987.6 | $957.6 | $30.0 | 3.1% | $2,935.6 | $2,866.1 | $69.5 | 2.4% | | **Adjusted EBITDA:** | | | | | | | | | | U.S. Markets | $223.0 | $218.4 | $4.6 | 2.1% | $645.1 | $669.5 | $(24.4) | (3.6)% | | International | 95.5 | 83.9 | 11.7 | 13.9% | 266.9 | 246.9 | 20.0 | 8.1% | | Consumer Interactive | 72.1 | 73.1 | (0.9) | (1.3)% | 209.9 | 210.0 | (0.1) | (0.1)% | | **Adjusted EBITDA margin:** | | | | | | | | | | U.S. Markets | 35.2% | 35.2% | | —% | 34.0% | 36.1% | | (2.1)% | | International | 45.3% | 44.3% | | 0.9% | 43.7% | 43.5% | | 0.2% | | Consumer Interactive | 50.4% | 49.6% | | 0.8% | 48.9% | 47.3% | | 1.6% | #### nm: not meaningful *As a result of displaying amounts in millions, rounding differences may exist in the table above.* We define Adjusted EBITDA Margin for our segments as the segment Adjusted EBITDA divided by segment gross revenue. #### U.S. Markets Segment #### Revenue U.S. Markets revenue increased $12.4 million, or 2.0%, and $41.6 million, or 2.2%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The increase was due primarily to an increase in our Emerging verticals and, for the nine-month period, a 1.1% increase due to our acquisition of Argus. *Financial Services:* Revenue remained relatively flat for the three months ended September 30, 2023, compared with the same period in 2022. Our Card and Banking line of business decreased due primarily to a decrease in marketing activity. Our Consumer Lending line of business decreased due to softness in the FinTech space from increasing interest rates. These decreases were offset by an increase in our Mortgage line of business due primarily to price increases partially offset by volume declines due to higher interest rates, and an increase in our Auto line of business due to price and volume increases. Revenue increased $16.5 million, or 1.7%, for the nine months ended September 30, 2023, compared with the same periods in 2022. Our Mortgage line of business increased due primarily to price increases, partially offset by volume declines due to higher interest rates. Our Auto line of business also increased due to price increases and an increase in volumes. Our Consumer Lending line of business decreased due to macroeconomic uncertainty driving a decline in marketing activity. Our Card and Banking line of business also decreased, due primarily to a decrease from reduced batch activity that was partially offset by an increase in online volumes. We anticipate interest rates will remain high and continue to impact our Financial Services business. *Emerging Verticals:* Revenue increased $13.1 million, or 4.4%, and $25.1 million or 2.8%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The increase was due to increases in our Technology, Insurance, Services & Collections, Media and Public Sector verticals, partially offset by a decrease in our Tenant and Employment verticals. #### Adjusted EBITDA For the three months ended September 30, 2023, Adjusted EBITDA increased $4.6 million, primarily due to an increase in revenue and a decrease in people costs, partially offset by higher variable product costs. For the nine months ended September 30, 2023, Adjusted EBITDA decreased $24.4 million, primarily due to higher variable product costs, an increase in people costs, and equipment and software expense, partially offset by an increase in revenue and a decrease in certain legal and regulatory expenses. For the three months ended September 30, 2023, Adjusted EBITDA margin was flat compared with the same period in 2022. For the nine months ended September 30, 2023, Adjusted EBITDA margin decreased, due primarily to a shift in the revenue mix and the lower margin profile of the Argus business. #### International Segment #### Revenue International revenue increased $21.8 million, or 11.5%, and $42.7 million, or 7.5%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022, due primarily to higher local currency revenue in all regions except for the United Kingdom, driven by increased volumes from improving economic conditions and new product initiatives. The impact of foreign currencies resulted in a revenue increase of 0.2% for the three-month period and a decrease of 4.6% for the nine-month period. *Canada:* Revenue increased $4.3 million, or 13.3%, and $7.0 million, or 7.2%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The increase was due primarily to higher local currency revenue from new business wins, including at a large bank, share-shifts from key customers, batch and breach services, and other volume increases, partially offset by a decrease in revenue of 3.3% and 5.2% in each respective period from the impact of foreign currencies. *Latin America:* Revenue increased $2.4 million, or 8.2%, and $4.0 million or 4.7%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The increase was due primarily to higher local currency revenue from broad-based growth across several of our markets, including ongoing new business wins, share-shifts, and other volume increases including expansion of our new solutions. The impact of foreign currencies resulted in a revenue increase of 5.5% for the three-month period and a revenue decrease of 1.6% for the nine-month period. *United Kingdom:* Revenue increased $1.3 million, or 2.6%, for the three months ended September 30, 2023, compared with the same period in 2022. The increase was primarily driven by a 7.1% impact of foreign currencies and volume growth from new products at key Financial Services customers, partially offset by the impact of a one-time contract in the prior period. Revenue decreased $8.5 million, or 5.5%, for the nine months ended September 30, 2023 compared with the same period in 2022. The decrease was primarily driven by the impact of a one-time contract in the prior year, and a 1.1% impact of foreign currencies, partially offset by volume growth from new products at key Financial Services customers. *Africa:* Revenue decreased $0.4 million, or 2.3%, and $1.6 million, or 3.6%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022. The decrease was primarily driven by a 10.3% and 14.3% impact of foreign currencies in each respective period. Excluding the impact of foreign currency, local currency revenue increased due to meaningful new business wins in the nine-month period and contract renewals as well as volume growth in emerging countries and emerging verticals in both periods. *India:* Revenue increased $11.7 million, or 26.4%, and $32.0 million, or 24.7%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022, due primarily to higher local currency revenue from growth in consumer and commercial credit markets fueled by healthy consumers who continued to spend despite rising inflation, including fraud, employment screening and consumer offerings, partially offset by a decrease of 4.6% and 8.2% in each respective period from the impact of foreign currencies. *Asia Pacific:* Revenue increased $2.5 million, or 12.8%, and $9.9 million, or 17.7%, for the three and nine months ended September 30, 2023, respectively, compared with the same periods in 2022, due primarily to higher local currency revenue from increased volumes resulting from improved macroeconomic conditions, including new business in the financial services market, new product adoptions and increased volume in our consumer offerings. The impact of foreign currencies resulted in a revenue increase of 0.5% for the three-month period and a decrease of 1.1% for the nine-month period. #### Adjusted EBITDA For the three and nine months ended September 30, 2023, Adjusted EBITDA increased $11.7 million and $20.0 million, respectively, due primarily to an increase in revenue, partially offset by an increase in labor costs to support growth initiatives in certain regions. For the three and nine months ended September 30, 2023, Adjusted EBITDA margins for the International segment increased and was relatively flat, for each respective period, due primarily to an increase in local currency revenue and improving market conditions in most of our regions, partially offset by an increase in labor costs to support growth initiatives in certain regions. #### Consumer Interactive Segment #### Revenue Consumer Interactive revenue decreased $4.2 million, or 2.9%, and $14.9 million, or 3.3%, respectively, for the three and nine months ended September 30, 2023, compared with the same periods in 2022, due primarily to a decrease in revenue in our direct channel as reduced advertising and slowing macroeconomic conditions significantly reduced consumer demand for our paid credit products, partially offset by an increase in revenue in our indirect channel. In our indirect channel, revenue was flat for the three-month period and increased for the nine-month period, due primarily to higher volumes and new contracts with existing customers, partially offset by a prior year breach services contract. #### Adjusted EBITDA For the three and nine months ended September 30, 2023, Adjusted EBITDA decreased $0.9 million and was relatively flat, for each respective period, due primarily to a decrease in advertising expense, partially offset by a decrease in revenue. For the three and nine months ended September 30, 2023, Adjusted EBITDA margin for the Consumer Interactive segment increased due to a decrease in advertising costs and revenue growth in our indirect channel, partially offset by a decrease in revenue in our direct channel. ### Non-GAAP measures—Three and Nine Months Ended September 30, 2023 and 2022: In addition to the GAAP measures discussed above, Management, including our CODM, evaluates the financial performance of our businesses based on the non-GAAP measures Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Provision for Income Taxes, Adjusted Effective Tax Rate and Leverage Ratio. ### Non-GAAP Financial Measures We present Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Provision for Income Taxes, Adjusted Effective Tax Rate and Leverage Ratio for all periods presented. These are important financial measures for the Company but are not financial measures as defined by GAAP. These financial measures should be reviewed in conjunction with the relevant GAAP financial measures and are not presented as alternative measures of GAAP. Other companies in our industry may define or calculate these measures differently than we do, limiting their usefulness as comparative measures. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP, including operating income, operating margin, effective tax rate, net income (loss) attributable to the Company, diluted earnings per share or cash provided by operating activities. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are presented in the tables below. We present Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings per Share, Adjusted Provision for Income Taxes and Adjusted Effective Tax Rate as supplemental measures of our operating performance because these measures eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. These are measures frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours. Our board of directors and executive management team use Adjusted EBITDA as an incentive compensation measure for most eligible employees and Adjusted Diluted Earnings per Share as an incentive compensation measure for certain of our senior executives. Under the credit agreement governing our Senior Secured Credit Facility, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to our Leverage Ratio which is partially based on Adjusted EBITDA. Investors also use our Leverage Ratio to assess our ability to service our debt and make other capital allocation decisions. We define Consolidated Adjusted EBITDA as net income (loss) attributable to TransUnion, less discontinued operations, net of tax, plus net interest expense, plus (less) provision (benefit) for income taxes, plus depreciation and amortization, plus goodwill impairment, plus stock-based compensation, plus mergers, acquisitions, divestitures and business optimization-related expenses, including Neustar integration-related expenses, plus certain accelerated technology investment expenses to migrate to the cloud, plus (less) certain other expenses (income). We define Consolidated Adjusted EBITDA Margin as Consolidated Adjusted EBITDA divided by total revenue as reported. We define Adjusted Net Income as net income (loss) attributable to TransUnion, less discontinued operations, net of tax, plus goodwill impairment, plus stock-based compensation, plus mergers, acquisitions, divestitures and business optimization-related expenses, including Neustar integration-related expenses, plus certain accelerated technology investment expenses, plus (less) certain other expenses (income), plus amortization of certain intangible assets, plus or minus the total adjustment for income taxes included in our Adjusted Provision for Income Taxes. We define Adjusted Diluted Earnings per Share as Adjusted Net Income divided by the weighted-average diluted shares outstanding. We define Adjusted Provision for Income Taxes as our provision for income taxes, plus or minus the tax impact on the adjustment included in Adjusted Net Income, plus or minus the impact of excess tax benefits for share compensation, plus or minus other items that relate to prior periods such as valuation allowance changes, deferred tax rate and return-to-provision adjustments, and other unusual items that are included in our provision for income taxes. We define Adjusted Effective Tax Rate as Adjusted Provision for Income Taxes divided by Adjusted Net Income. We define Leverage Ratio as net debt divided by Consolidated Adjusted EBITDA for the most recent twelve-month period including twelve months of Adjusted EBITDA from significant acquisitions. Net debt is defined as total debt less cash and cash equivalents as reported on the balance sheet as of the end of the period. For the three and nine months ended September 30, 2023 and 2022, these non-GAAP measures were as follows: ### Adjusted EBITDA and Adjusted EBITDA Margin: *(dollars in millions)* | Reconciliation of net income (loss) attributable to TransUnion to consolidated Adjusted EBITDA: | Three Months Ended September 30, 2023 vs. 2022 (As Restated) 2023 | 2022 | Change 2023 vs. 2022 $% 2023 | | Nine Months Ended September 30, (As Restated) | 2022 | Change $% | | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Net income (loss) attributable to TransUnion | $(318.8) | $79.2 | $(398.0) | nm | $(212.2) | $223.0 | $(435.3) | nm | | Discontinued operations, net of tax | 0.5 | (2.4) | 2.9 | nm | 0.7 | (2.3) | 3.1 | nm | | Income (loss) from continuing operations attributable to TransUnion | $(318.3) | $76.8 | $(395.0) | nm | $(211.5) | $220.7 | $(432.2) | nm | | Net interest expense | 67.8 | 60.2 | 7.6 | 12.6% | 202.1 | 160.4 | 41.7 | 26.0% | | Provision for income taxes | 22.2 | 30.6 | (8.3) | (27.3)% | 60.1 | 84.1 | (24.0) | (28.6)% | | Depreciation and amortization | 131.3 | 129.6 | 1.8 | 1.4% | 391.1 | 389.0 | 2.1 | 0.6% | | EBITDA | $(97.0) | $297.1 | $(394.1) | nm | $441.8 | $854.1 | $(412.3) | (48.3)% | | Adjustments to EBITDA: | | | | | | | | | | Goodwill impairment1 | 414.0 | — | 414.0 | nm | 414.0 | — | 414.0 | nm | | Stock-based compensation2 | 27.0 | 19.9 | 7.0 | 35.4% | 73.3 | 60.8 | 12.5 | 20.5% | | Mergers and acquisitions, divestitures and business optimization3 | (6.0) | 7.8 | (13.8) | nm | 24.5 | 36.4 | (12.0) | (32.8)% | | Accelerated technology investment4 | 16.3 | 12.1 | 4.2 | 34.8% | 53.5 | 32.2 | 21.3 | 66.3% | | Net other5 | 1.8 | 3.8 | (2.0) | (52.1)% | 10.6 | 41.7 | (31.1) | (74.6)% | | Total adjustments to EBITDA | $453.1 | $43.6 | $409.5 | nm | $575.8 | $171.1 | $404.8 | nm | | **Consolidated Adjusted EBITDA** | $356.1 | $340.7 | $15.4 | 4.5% | $1,017.6 | $1,025.2 | $(7.6) | (0.7)% | | Net income (loss) attributable to TransUnion margin | (32.9)% | 8.4% | | (41.3)% | (7.4)% | 7.9% | | (15.3)% | | Consolidated Adjusted EBITDA margin6 | 36.8% | 36.3% | | 0.5% | 35.4% | 36.5% | | (1.1)% | #### nm: not meaningful *As a result of displaying amounts in millions, rounding differences may exist in the table above.* 1\. For the three and nine months ended September 30, 2023, we recorded a goodwill impairment of $414.0 million (as restated) related to our United Kingdom reporting unit in our International segment. 2\. Consisted of stock-based compensation, including amounts which are cash settled. 3\. Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments: For the three months ended September 30, 2023, $4.1 million of Neustar integration costs; $1.7 million of acquisition expenses; a $1.0 million adjustment to fair value of a note receivable; an $(11.7) million adjustment to the fair value of a put option liability related to a minority investment; and $(1.1) million of reimbursements for transition services related to divested businesses, net of separation expenses. For the three months ended September 30, 2022, $8.7 million of Neustar integration costs; $3.4 million of acquisition expenses; a $(3.4) million gain related to a government tax reimbursement from a recent business acquisition; $(0.7) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.3) million adjustment to the fair value of a put option liability related to a minority investment. For the nine months ended September 30, 2023, $15.6 million of Neustar integration costs; a $9.1 million loss on the impairment of a Cost Method Investment; $5.5 million of acquisition expenses; $5.1 million of adjustments to liabilities from a recent acquisition; a $(6.2) million adjustment to the fair value of a put option liability related to a minority investment; $(2.4) million of reimbursements for transition services related to divested businesses, net of separation expenses; a $(1.3) million adjustment to the fair value of a note receivable; and a $(0.8) million gain on the disposal of a Cost Method Investment. For the nine months ended September 30, 2022, $25.5 million of Neustar integration costs; $21.4 million of acquisition expenses; $(6.0) million of reimbursements for transition services related to divested businesses, net of separation expenses; a $(3.4) million gain related to a government tax reimbursement from a recent business acquisition; and a $(1.0) million adjustment to the fair value of a put option liability related to a minority investment. 4\. Represents expenses associated with our accelerated technology investment to migrate to the cloud. 5\. Net other consisted of the following adjustments: For the three months ended September 30, 2023, $1.0 million of deferred loan fees written off as a result of the prepayment on our debt; and a $0.9 million net loss from currency remeasurement of our foreign operations, loan fees and other. For the three months ended September 30, 2022, a $3.8 million net loss from currency remeasurement of our foreign operations, loan fees and other. For the nine months ended September 30, 2023, $3.1 million of deferred loan fees written off as a result of the prepayment on our debt; and a $7.5 million net loss from currency remeasurement of our foreign operations, loan fees and other. For the nine months ended September 30, 2022, $28.4 million for certain legal and regulatory expenses; $6.5 million of deferred loan fees written off as a result of the prepayments on our debt; and a $6.8 million net loss from currency remeasurement of our foreign operations, loan fees and other. 6\. Consolidated Adjusted EBITDA margin is calculated by dividing Consolidated Adjusted EBITDA by total revenue. #### Consolidated Adjusted EBITDA Consolidated Adjusted EBITDA increased $15.5 million for the three months ended September 30, 2023 and decreased $7.6 million for the nine months ended September 30, 2023, compared with the same periods in 2022. The increase for the three-month period was due primarily to: - an increase in revenue; and - a decrease in advertising expense, partially offset by: - higher variable product costs; and - an increase in labor costs. The decrease for the nine-month period was due primarily to: - an increase in labor costs; and - operating costs of our 2022 acquisition, partially offset by: - a decrease in advertising expense; and - an increase in revenue. #### Consolidated Adjusted EBITDA Margin For the three months ended September 30, 2023 Consolidated Adjusted EBITDA margin increased, primarily due to increase in revenue and advertising expense. For the nine months ended September 30, 2023, Consolidated Adjusted EBITDA margin decreased, due primarily to lower margins from our recent acquisitions and higher variable product costs in our U.S. Markets segment. ### Adjusted Net Income and Adjusted Diluted Earnings Per Share *(dollars in millions)* | Reconciliation of net income (loss) attributable to TransUnion to Adjusted Net Income: | Three Months Ended September 30, 2023 vs. 2022 (As Restated) 2023 | 2022 | Change 2023 vs. 2022 $% 2023 | | Nine Months Ended September 30, (As Restated) | 2022 | Change $% | | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Net income (loss) attributable to TransUnion | $(318.8) | $79.2 | $(398.0) | nm | $(212.2) | $223.0 | $(435.3) | nm | | Discontinued operations, net of tax | 0.5 | (2.4) | 2.9 | nm | 0.7 | (2.3) | 3.1 | nm | | Income (loss) from continuing operations attributable to TransUnion | $(318.3) | $76.8 | $(395.0) | nm | $(211.5) | $220.7 | $(432.2) | nm | | Adjustments before income tax items: | | | | | | | | | | Goodwill impairment2 | 414.0 | — | 414.0 | nm | 414.0 | — | 414.0 | nm | | Stock-based compensation3 | 27.0 | 19.9 | 7.0 | 35.4% | 73.3 | 60.8 | 12.5 | 20.5% | | Mergers and acquisitions, divestitures and business optimization4 | (6.0) | 7.8 | (13.8) | nm | 24.5 | 36.4 | (12.0) | (32.8)% | | Accelerated technology investment5 | 16.3 | 12.1 | 4.2 | 34.8% | 53.5 | 32.2 | 21.3 | 66.3% | | Net other6 | 1.8 | 3.4 | (1.6) | (47.3)% | 9.6 | 40.5 | (30.9) | (76.2)% | | Amortization of certain intangible assets7 | 72.1 | 76.7 | (4.6) | (6.0)% | 221.2 | 231.1 | (9.9) | (4.3)% | | Total adjustments before income tax items | $525.2 | $119.9 | $405.2 | nm | $796.0 | $401.0 | $395.1 | nm | | Change in provision for income taxes | (29.5) | (16.5) | (13.0) | 78.7% | (85.2) | (73.2) | (12.1) | 16.5% | | **Adjusted Net Income** | $177.4 | $180.2 | $(2.8) | (1.5)% | $499.3 | $548.5 | $(49.2) | (9.0)% | | Weighted-average shares outstanding: | | | | | | | | | | Basic | 193.4 | 192.6 | nm | nm | 193.3 | 192.4 | nm | nm | | Diluted8 | 194.6 | 193.2 | nm | nm | 194.8 | 193.1 | nm | nm | | Adjusted Earnings per Share: | | | | | | | | | | Basic | $0.92 | $0.94 | $(0.02) | (2.0)% | $2.58 | $2.85 | $(0.27) | (9.4)% | | Diluted | $0.91 | $0.93 | $(0.02) | (2.3)% | $2.56 | $2.84 | $(0.28) | (9.7)% | 44 | Reconciliation of diluted earnings per share from net income attributable to TransUnion to Adjusted Diluted Earnings per Share: Diluted earnings per common share1 from: | Three Months Ended September 30, (As Restated) 2023 | 2022 2023 | Nine Months Ended September 30, (As Restated) | 2022 | | --- | ---: | ---: | ---: | ---: | | Net income (loss) attributable to TransUnion | $(1.65) | $0.41 | $(1.10) | $1.15 | | Discontinued operations, net of tax | — | (0.01) | — | (0.01) | | Income (loss) from continuing operations attributable to TransUnion | $(1.65) | $0.40 | $(1.09) | $1.14 | | Adjustments before income tax items: | | | | | | Goodwill2 | 2.13 | — | 2.13 | — | | Stock-based compensation3 | 0.14 | 0.10 | 0.38 | 0.31 | | Mergers and acquisitions, divestitures and business optimization4 | (0.03) | 0.04 | 0.13 | 0.19 | | Accelerated technology investment5 | 0.08 | 0.06 | 0.27 | 0.17 | | Net other6 | 0.01 | 0.02 | 0.05 | 0.21 | | Amortization of certain intangible assets7 | 0.37 | 0.40 | 1.14 | 1.20 | | Total adjustments before income tax items | $2.70 | $0.62 | $4.09 | $2.08 | | Change in provision for income taxes | (0.15) | (0.09) | (0.44) | (0.38) | | Impact of additional dilutive shares8 | $0.01 | $— | $0.02 | $— | | Adjusted Diluted Earnings per Share | $0.91 | $0.93 | $2.56 | $2.84 | *As a result of displaying amounts in millions, rounding differences may exist in the table above and footnotes below.* 1\. For the three and nine months ended September 30, 2023, each component of earnings per share is calculated independently, therefore, rounding differences exist in the table above. 2\. For the three and nine months ended September 30, 2023, we recorded a goodwill impairment of $414.0 million (as restated) related to our United Kingdom reporting unit in our International segment. 3\. Consisted of stock-based compensation, including amounts which are cash settled. 4\. Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments: For the three months ended September 30, 2023, $4.1 million of Neustar integration costs; $1.7 million of acquisition expenses; a $1.0 million adjustment to fair value of a note receivable; an $(11.7) million adjustment to the fair value of a put option liability related to a minority investment; and $(1.1) million of reimbursements for transition services related to divested businesses, net of separation expenses. For the three months ended September 30, 2022, $8.7 million of Neustar integration costs; $3.4 million of acquisition expenses; a $(3.4) million gain related to a government tax reimbursement from a recent business acquisition; $(0.7) million of reimbursements for transition services related to divested businesses, net of separation expenses; and a $(0.3) million adjustment to the fair value of a put option liability related to a minority investment. For the nine months ended September 30, 2023, $15.6 million of Neustar integration costs; a $9.1 million loss on the impairment of a Cost Method Investment; $5.5 million of acquisition expenses; $5.1 million of adjustments to liabilities from a recent acquisition; a $(6.2) million adjustment to the fair value of a put option liability related to a minority investment; $(2.4) million of reimbursements for transition services related to divested businesses, net of separation expenses; a $(1.3) million adjustment to the fair value of a note receivable; and a $(0.8) million gain on the disposal of a Cost Method Investment. For the nine months ended September 30, 2022, $25.5 million of Neustar integration costs; $21.4 million of acquisition expenses; $(6.0) million of reimbursements for transition services related to divested businesses, net of separation expenses; a $(3.4) million gain related to a government tax reimbursement from a recent business acquisition; and a $(1.0) million adjustment to the fair value of a put option liability related to a minority investment. 5\. Represents expenses associated with our accelerated technology investment to migrate to the cloud. 6\. Net other consisted of the following adjustments: For the three months ended September 30, 2023, $1.0 million of deferred loan fees written off as a result of the prepayment on our debt; and a $0.8 million net loss from currency remeasurement of our foreign operations and other. For the three months ended September 30, 2022, a $3.4 million net loss from currency remeasurement of our foreign operations and other. For the nine months ended September 30, 2023, $3.1 million of deferred loan fees written off as a result of the prepayment on our debt; and a $6.5 million net loss from currency remeasurement of our foreign operations and other. For the nine months ended September 30, 2022, a $28.4 million net increase in certain legal and regulatory expenses; $6.5 million of deferred loan fees written off as a result of the prepayments on our debt; and a $5.6 million net loss from currency remeasurement of our foreign operations and other. 7\. Consisted of amortization of intangible assets from our 2012 change-in-control transaction and amortization of intangible assets established in business acquisitions after our 2012 change-in-control transaction. 8\. Diluted share counts for Adjusted Diluted Earnings Per Share includes an additional 1.2 million and 1.5 million of dilutive securities for the three months and nine months ended September 30, 2023, respectively, which are not included in GAAP diluted weighted-average shares outstanding due to the Company’s net loss position for the three and nine months ended September 30, 2023. #### Adjusted Net Income For the three and nine months ended September 30, 2023, Adjusted Net Income decreased slightly, due primarily to an increase in interest expense, partially offset by an increase in interest income. ### Adjusted Provision for Income Taxes and Adjusted Effective Tax Rate | | Three Months Ended September 30, (As Restated) 2023 | 2022 2023 | Nine Months Ended September 30, (As Restated) | 2022 | | --- | ---: | ---: | ---: | ---: | | Income (loss) from continuing operations before income taxes | $(291.7) | $110.8 | $(139.5) | $316.1 | | Total adjustments before income tax items from Adjusted Net Income table above | 525.2 | 119.9 | 796.0 | 401.0 | | Adjusted income from continuing operations before income taxes | $233.5 | $230.8 | $656.5 | $717.0 | | **Reconciliation of provision for income taxes to Adjusted Provision for Income Taxes:** | | | | | | Provision for income taxes | (22.2) | (30.6) | (60.1) | (84.1) | | Adjustments for income taxes: | | | | | | Tax effect of above adjustments1 | (27.9) | (26.1) | (90.1) | (82.7) | | Eliminate impact of excess tax expenses/(benefits) for stock-based compensation | 0.7 | (0.6) | 2.7 | (5.6) | | Other2 | (2.2) | 10.2 | 2.2 | 15.1 | | Total adjustments for income taxes | $(29.5) | $(16.5) | $(85.2) | $(73.2) | | **Adjusted Provision for Income Taxes** | $(51.7) | $(47.1) | $(145.3) | $(157.3) | | Effective tax rate | (7.6)% | 27.6% | (43.1)% | 26.6% | | Adjusted Effective Tax Rate | 22.2% | 20.4% | 22.1% | 21.9% | *As a result of displaying amounts in millions, rounding differences may exist in the table above.* 1\. Tax rates used to calculate the tax expense impact are based on the nature of each item. 2\. For the three months ended September 30, 2023, ($1.8) million of valuation allowances related to prior periods; ($0.5) million of return to provision, audit adjustments, and reserves related to prior periods; and $0.1 of other adjustments. For the three months ended September 30, 2022, $6.7 million of valuation allowances related to prior periods; $1.8 million of return to provision and audit adjustments related to prior periods; and $1.7 million of other adjustments. For the nine months ended September 30, 2023, $2.6 million of return to provision, audit adjustments, and reserves related to prior periods; ($0.7) million of valuation allowances related to prior periods; and $0.3 million of other adjustments. For the nine months ended September 30, 2022, $7.3 million of valuation allowances related to prior periods; $2.8 million of return to provision and audit adjustments related to prior periods; $2.0 million of deferred tax rate adjustments, and $3.0 million of other adjustments. ### Adjusted Provision for Income Taxes We reported an adjusted tax rate of 22.2% for the three months ended September 30, 2023, which is higher than the 21.0% U.S. federal corporate statutory rate, due primarily to increases for state taxes and foreign withholding taxes, partially offset by benefits from the foreign rate differential and the research and development credit. We reported an adjusted tax rate of 20.4% for the three months ended September 30, 2022, which is lower than the 21.0% U.S. federal corporate statutory rate, due primarily to benefits from the foreign rate differential, foreign tax credits, and the research and development credit, partially offset by increases for state taxes and foreign withholding taxes. We reported an adjusted tax rate of 22.1% for the nine months ended September 30, 2023, which is higher than the 21.0% U.S. federal corporate statutory rate, due primarily to increases for state taxes and foreign withholding taxes, partially offset by benefits from the foreign rate differential and the research and development credit. We reported an adjusted tax rate of 21.9% for the nine months ended September 30, 2022, which is higher than the 21.0% U.S. federal corporate statutory rate, due primarily to increases for state taxes and foreign withholding taxes, partially offset by benefits from the research and development credit, foreign tax credits, and the foreign rate differential. ### Leverage Ratio *(dollars in millions)* | Reconciliation of net income (loss) attributable to TransUnion to Adjusted EBITDA: | (As Restated) Trailing Twelve Months Ended September 30, 2023 | | --- | ---: | | Net income (loss) attributable to TransUnion | $(165.8) | | Discontinued operations, net of tax | (14.3) | | Income (loss) from continuing operations attributable to TransUnion | $(180.1) | | Net interest expense | 268.0 | | Provision for income taxes | 95.9 | | Depreciation and amortization | 521.2 | | **EBITDA** | $704.9 | | **Adjustments to EBITDA:** | | | Goodwill impairment1 | $414.0 | | Stock-based compensation2 | 93.6 | | Mergers and acquisitions, divestitures and business optimization3 | 38.8 | | Accelerated technology investment4 | 72.7 | | Net other5 | 14.9 | | **Total adjustments to EBITDA** | $634.0 | | Leverage Ratio Adjusted EBITDA | $1,338.9 | | Total debt | $5,368.5 | | Less: Cash and cash equivalents | 420.9 | | Net Debt | $4,947.7 | | Ratio of Net Debt to Net income (loss) attributable to TransUnion | (29.8) | | Leverage Ratio | 3.7 | *As a result of displaying amounts in millions, rounding differences may exist in the table above.* 1\. For the three and nine months ended September 30, 2023, we recorded a goodwill impairment of $414.0 million (as restated) related to our United Kingdom reporting unit in our International segment. 2\. Consisted of stock-based compensation, including amounts which are cash settled. 3\. Mergers and acquisitions, divestitures and business optimization consisted of the following adjustments: $23.3 million of Neustar integration costs; a $13.7 million loss on the impairment of Cost Method Investments; $7.9 million of acquisition expenses; a $5.8 million adjustment to the fair value of a put option liability related to a minority investment; a $5.0 million adjustment to a liability from a recent acquisition; and $(3.2) million of reimbursements for transition services related to divested businesses, net of separation expenses; a $(1.3) million adjustment to the fair value of a note receivable; a $(0.8) million gain on disposal of a Cost Method investment. 4\. Represents expenses associated with our accelerated technology investment to migrate to the cloud. 5\. Net other consisted of the following adjustments: a $7.4 million net loss from currency remeasurement of our foreign operations, loan fees and other; and $7.4 million of deferred loan fees written off as a result of the prepayments on our debt. ### Application of Critical Accounting Estimates We prepare our consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”). The notes to our consolidated financial statements include disclosures about our significant accounting policies. These accounting policies require us to make certain judgments and estimates in reporting our operating results and our assets and liabilities. See Part II, Item 7, “Application of Critical Accounting Estimates” and Part II, Item 8, Note 1, “Significant Accounting and Reporting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 14, 2023, for additional information about our critical accounting estimates. ### Goodwill impairment In our Annual Report on Form 10-K for the year ended 2022, we disclosed that for our United Kingdom reporting unit, we had $681.2 million of goodwill as of December 31, 2022. The calculated excess fair value over carrying value was less than 10% of its carrying value as of October 31, 2022, our annual assessment date. Therefore, we concluded no impairment existed for this reporting unit. We test goodwill for impairment on an annual basis in the fourth quarter and monitor throughout the year for impairment triggering events that indicate that the carrying value of one or more of our reporting units exceeds its fair value. During the three months ended September 30, 2023, we identified a triggering event requiring an interim impairment assessment for our United Kingdom reporting unit, which resulted in a goodwill impairment of $414.0 million (as restated). The worsening macroeconomic conditions during the third quarter from inflationary pressures and rising interest rates increasingly impacted our business for the current quarter and the near-term outlook. Due to these factors, management now believes the U.K. recovery will take longer, and will be at a slower pace, than previously expected. As a result, we have revised our short-term and mid-term forecasts for revenue and EBITDA expectations for our United Kingdom reporting unit. These factors have particularly impacted the online-only FinTech lenders that represent the largest vertical within our United Kingdom reporting unit. These lenders have seen significant declines in their access to capital impacting their ability to lend and in some cases leading to bankruptcies. Our quantitative impairment test for the United Kingdom reporting unit consisted of a fair value calculation that combines an income approach, using the discounted cash flow method, and a market approach, using the guideline public company method. The quantitative impairment test requires the application of a number of significant assumptions, including estimates of future revenue growth rates, EBITDA margins, discount rates, and market multiples. The projected future revenue growth rates and EBITDA margins, and the resulting projected cash flows of the United Kingdom reporting unit are based on historical experience and internal operating plans reviewed by management, extrapolated over the forecast period. Discount rates are determined using a weighted average cost of capital adjusted for risk factors specific to the United Kingdom. Market multiples are based on the guideline public company method using comparable publicly traded company multiples of EBITDA for a group of benchmark companies. We believe the assumptions that we use in our quantitative analysis are reasonable and consistent with assumptions that would be used by other marketplace participants. However, such assumptions are inherently uncertain, and a change in assumptions could change the estimated fair value of our United Kingdom reporting unit. Therefore, future impairments of our United Kingdom reporting unit could be required, which could be material to the consolidated financial statements. We engaged a third-party valuation specialist to assist in our analysis of the fair value of our United Kingdom reporting unit. All judgments, significant assumptions and estimates, and forecasts were either provided by or reviewed by us. While we chose to utilize a third-party valuation specialist for assistance, the fair value analysis reflects the conclusions of management and not those of any third party. We performed a sensitivity assessment for the significant assumptions used with the goodwill impairment analysis for the United Kingdom reporting unit for the quarter ended September 30, 2023, holding all other assumptions constant: - A hypothetical 50 basis point increase to the discount rate, holding all other assumptions constant, would result in a further impairment expense of approximately $35 million determined by the income approach. - A hypothetical decrease in the expected average annual revenue growth rate of approximately 70 basis points over the entire forecast period, holding all other assumptions constant, would result in a further impairment expense of approximately $30 million determined by the income approach. - A hypothetical decrease in the expected EBITDA margins of 150 basis points in each year over the entire forecast period, holding all other assumptions constant, would result in a further impairment expense of $30 million determined by the income approach. While unfavorable macroeconomic conditions are impacting some of our other reporting units, these reporting units are less sensitive to a change in forecast assumptions than our United Kingdom reporting unit due to greater excess of fair value over carrying value as of our 2022 goodwill impairment test. We did not identify a triggering event in any other reporting unit. ### Liquidity and Capital Resources ### Overview Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and our Senior Secured Revolving Line of Credit. Our principal uses of liquidity are working capital, capital expenditures, debt service and other capital structure obligations, business acquisitions, dividends, and other general corporate purposes. We believe our cash-on-hand, cash generated from operations, and funds available under the Senior Secured Revolving Line of Credit will be sufficient to fund our planned capital expenditures, debt service and other capital structure obligations, business acquisitions, dividends, and operating needs for the foreseeable future. Our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue, macroeconomic conditions, our ability to contain costs, including capital expenditures, and to collect accounts receivable, and various other factors, many of which are beyond our control. We will continue to monitor our liquidity position and may elect to raise funds through debt or equity financing in the future to fund significant investments or acquisitions that are consistent with our growth strategy. Cash and cash equivalents totaled $420.9 million and $585.3 million at September 30, 2023, and December 31, 2022, respectively, of which $334.7 million and $303.4 million was held outside the United States in each respective period. As of September 30, 2023, we had no outstanding balance under the Senior Secured Revolving Credit Facility and $1.2 million of outstanding letters of credit, and could have borrowed up to the remaining $298.8 million available. We also have the ability to request incremental loans on the same terms under the existing Senior Secured Credit Facility up to the greater of an additional $1,000.0 million and 100% of Consolidated EBITDA. In addition, as long as the senior secured net leverage ratio does not exceed 4.25-to-1, we may incur additional incremental loans, subject to certain additional conditions and commitments by existing or new lenders to fund any additional borrowings. With certain exceptions, the Senior Secured Credit Facility obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investments in subsidiaries. The Senior Secured Credit Facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. The senior secured net leverage test must be met as a condition to incur additional indebtedness, make certain investments, and may be required to make certain restricted payments. The senior secured net leverage ratio must not exceed 5.5-to-1 at any such measurement date. Each year, the Company may be required to make additional principal payments on the Senior Secured Term Loan B based on excess cash flows of the prior year, as defined in the agreement. There were no excess cash flows for 2022 and therefore no additional payment will be required in 2023. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt,” for additional information about our debt. During the nine months ended September 30, 2023, we prepaid $225.0 million of our Senior Secured Term Loan B-6, funded from our cash-on-hand. In the third quarter of 2023, we paid dividends of $0.105 per share totaling $20.5 million. Dividends declared accrue to outstanding restricted stock units and are paid to employees as dividend equivalents when the restricted stock units vest. While we currently expect to continue to pay quarterly dividends, any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on a number of factors, including our liquidity, results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directors deems appropriate. We currently have capacity and intend to continue to pay a quarterly dividend, subject to approval by our board. On February 13, 2017, our board of directors authorized the repurchase of up to $300.0 million of our common stock over the next 3 years. Our board of directors removed the three-year time limitation on February 8, 2018. To date, we have repurchased $133.5 million of our common stock and have the ability to repurchase the remaining $166.5 million. We have no obligation to repurchase additional shares and the timing, actual number and value of the shares that are repurchased, if any, will be at the discretion of management and will depend on a number of factors, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. Repurchases may be suspended, terminated or modified at any time for any reason. Any repurchased shares will have the status of treasury shares and may be used, if and when needed, for general corporate purposes. ### Sources and Uses of Cash *(in millions)* | | Nine Months Ended September 30, 2023 | 2022 | Change | | --- | ---: | ---: | ---: | | Cash provided by (used in) operating activities of continuing operations | $443.8 | $70.8 | $373.0 | | Cash used in investing activities of continuing operations | (230.5) | (734.7) | 504.2 | | Cash used in financing activities of continuing operations | (375.3) | (563.9) | 188.6 | | Cash flows of discontinued operations and effect of exchange rate changes on cash and cash equivalents | (2.4) | (18.5) | 16.1 | | Net change in cash and cash equivalents | $(164.4) | $(1,246.3) | $1,081.9 | #### Operating Activities The increase in cash provided by continuing operations was due primarily to prior year taxes paid on the gain from the divestiture of our Healthcare business and lower bonus and commission payments in the current year, partially offset by an increase in interest expense. #### Investing Activities The decrease in cash used in investing activities of continuing operations was due primarily to the acquisition of Argus in the prior year. #### Financing Activities The decrease in cash used in financing activities of continuing operations was due primarily to a decrease in debt prepayments and cash used to pay employee taxes on restricted stock units. ### Capital Expenditures We make capital expenditures to grow our business by developing new and enhanced capabilities, to increase the effectiveness and efficiency of the organization and to reduce risks. We make capital expenditures for product development, disaster recovery, security enhancements, regulatory compliance, and the replacement and upgrade of existing equipment at the end of its useful life. Cash paid for capital expenditures increased $20.7 million, from $192.5 million for the nine months ended September 30, 2022, to $213.2 million for the nine months ended September 30, 2023. ### Debt #### Hedges Effective May 31, 2023, we amended all our interest rate swaps to replace the reference rate from LIBOR to Term SOFR. We applied the practical expedient for reference rate reform to continue to apply hedge accounting to the existing relationships. On November 16, 2022, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. The swaps commenced on December 30, 2022, and expire on December 31, 2024, with a current aggregate notional amount of $1,305.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 4.3380% and 4.3870% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges. On December 23, 2021, we entered into interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loan or similar replacement debt. The swaps commenced on December 31, 2021, and expire on December 31, 2026, with a current aggregate notional amount of $1,572.0 million that amortizes each quarter. The swaps require us to pay fixed rates varying between 1.3800% and 1.3915% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges. On March 10, 2020, we entered into two tranches of interest rate swap agreements with various counterparties that effectively fix our variable interest rate exposure on a portion of our Senior Secured Term Loans or similar replacement debt. The first swap commenced on June 30, 2020, and expired on June 30, 2022. The second swap commenced on June 30, 2022, and expires on June 30, 2025, with a current aggregate notional amount of $1,085.0 million that amortizes each quarter after it commences. The second swap requires us to pay fixed rates varying between 0.8680% and 0.8800% in exchange for receiving a variable rate that matches the variable rate on our loans. We have designated these swap agreements as cash flow hedges. #### Effect of Certain Debt Covenants A breach of any of the covenants under the agreements governing our debt could limit our ability to borrow funds under the Senior Secured Revolving Line of Credit and could result in a default under the Senior Secured Credit Facility. Upon the occurrence of an event of default under the Senior Secured Credit Facility, the lenders could elect to declare all amounts then outstanding to be immediately due and payable, and the lenders could terminate all commitments to extend further credit. If we were unable to repay the amounts declared due, the lenders could proceed against any collateral granted to them to secure that indebtedness. With certain exceptions, the Senior Secured Credit Facility obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, including its investment in subsidiaries. The Senior Secured Credit Facility contains various restrictions and nonfinancial covenants, along with a senior secured net leverage ratio test. The nonfinancial covenants include restrictions on dividends, investments, dispositions, future borrowings and other specified payments, as well as additional reporting and disclosure requirements. The senior secured net leverage test must be met as a condition to incur additional indebtedness, make certain investments, and may be required to make certain restricted payments. The senior secured net leverage ratio must not exceed 5.5-to-1 at any such measurement date. Under the terms of the Senior Secured Credit Facility, TransUnion may make dividend payments up to the greater of $100 million or 10.0% of Consolidated EBITDA per year, or an unlimited amount provided that no default or event of default exists and so long as the total net leverage ratio does not exceed 4.75-to-1. As of September 30, 2023, we were in compliance with all debt covenants. Our ability to meet our liquidity needs or to pay dividends on our common stock depends on our subsidiaries’ earnings, the terms of their indebtedness, and other contractual restrictions. For additional information about our debt and hedge, see Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt.” ### Contractual Obligations Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 in Part II, Item 8, “Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements,” Note 12, “Debt” for information about our long-term debt obligations, noncancelable lease obligations, and noncancelable purchase obligations as of December 31, 2022. ### Recent Accounting Pronouncements See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 1, “Significant Accounting and Reporting Policies,” for information about recent accounting pronouncements and the impact on our consolidated financial statements. ### Cautionary Notice Regarding Forward-Looking Statements This Amendment No. 1 to Quarterly Report on Form 10-Q/A, including the exhibits hereto, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of TransUnion’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those described in the forward-looking statements. Any statements made in this report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “guidance,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “potential,” “continues,” “seeks,” “predicts,” or the negatives of these words and other similar expressions. Factors that could cause actual results to differ materially from those described in the forward-looking statements, or that could materially affect our financial results or such forward-looking statements include: - macroeconomic effects and changes in market conditions, including the impact of inflation, risk of recession, and industry trends and adverse developments in the debt, consumer credit and financial services markets, including the impact on the carrying value of our assets in all of the markets where we operate; - our ability to provide competitive services and prices; - our ability to retain or renew existing agreements with large or long-term customers; - our ability to maintain the security and integrity of our data; - our ability to deliver services timely without interruption; - our ability to maintain our access to data sources; - government regulation and changes in the regulatory environment; - litigation or regulatory proceedings; - our ability to effectively manage our costs; - economic and political stability in the United States and international markets where we operate; - our ability to effectively develop and maintain strategic alliances and joint ventures; - our ability to timely develop new services and the market’s willingness to adopt our new services; - our ability to manage and expand our operations and keep up with rapidly changing technologies; - our ability to acquire businesses, successfully secure financing for our acquisitions, timely consummate our acquisitions, successfully integrate the operations of our acquisitions, control the costs of integrating our acquisitions and realize the intended benefits of such acquisitions; - our ability to protect and enforce our intellectual property, trade secrets and other forms of unpatented intellectual property; - our ability to defend our intellectual property from infringement claims by third parties; - geopolitical conditions, including the war in Ukraine and the evolving conflict in Israel and surrounding areas; - the ability of our outside service providers and key vendors to fulfill their obligations to us; - further consolidation in our end-customer markets; - the increased availability of free or inexpensive consumer information; - losses against which we do not insure; - our ability to make timely payments of principal and interest on our indebtedness; - our ability to satisfy covenants in the agreements governing our indebtedness; - our ability to maintain our liquidity; - share repurchase plans; and - our reliance on key management personnel. There may be other factors, many of which are beyond our control, that may cause our actual results to differ materially from the forward-looking statements, including factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed with the Securities and Exchange Commission, and in this report under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties. The forward-looking statements contained in this report speak only as of the date of this report. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements to reflect the impact of events or circumstances that may arise after the date of this report. ## Market risk As filed, 3,361 characters. There have been no other material changes from the quantitative and qualitative disclosures about market risk included in our Annual Report on Form 10-K for the year ended December 31, 2022. In the normal course of business we are exposed to market risk, primarily from changes in variable interest rates and foreign currency exchange rates, which could impact our results of operations and financial position. We manage the exposure to this market risk through our regular operating and financing activities. We may use derivative financial instruments, such as foreign currency and interest rate hedges, but only as a risk management tool and not for speculative or trading purposes. ### Interest Rate Risk Our Senior Secured Credit Facility consists of Senior Secured Term Loans and a $300.0 million Senior Secured Revolving Line of Credit. Interest rates on these borrowings are based, at our election, on Term SOFR plus a credit spread adjustment, or an alternate base rate, subject to floors, plus applicable margins based on applicable net leverage ratios. As of December 31, 2022, essentially all of our outstanding debt was variable-rate debt. We currently have several interest rate hedge instruments that effectively fix our variable interest rate exposure on approximately 73.3% of our outstanding debt. Based on the amount of unhedged outstanding variable-rate debt, we have a material exposure to interest rate risk. In the future, our exposure to interest rate risk may change due to changes in the amount borrowed, changes in interest rates, or changes in the amount we have hedged. The amount of our outstanding debt, and the ratio of fixed-rate debt to variable-rate debt, can be expected to vary as a result of future business requirements, market conditions or other factors. During the third quarter of 2023, a 10% change in the average Term SOFR rates utilized in the calculation of our actual interest expense would have increased our interest expense by $7.8 million. See Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” Note 11, “Debt,” for additional information about interest rates on our debt. ### Foreign Currency Exchange Rate Risk A substantial majority of our revenue, expense and capital expenditure activities are transacted in U.S. dollars. However, we transact business in a number of foreign currencies, including British pounds sterling, the South African rand, the Canadian dollar, the Indian rupee, the Colombian peso and the Brazilian real. In reporting the results of our foreign operations, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to the foreign currencies. We are required to translate the assets and liabilities of our foreign subsidiaries that are measured in foreign currencies at the applicable period-end exchange rate in our consolidated balance sheets. We are required to translate revenue and expenses at the average exchange rates prevailing during the year in our consolidated statements of income. The resulting translation adjustment is included in other comprehensive income, as a component of stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income and expense as incurred. ## Controls and procedures As filed, 3,863 characters. ### Disclosure Controls and Procedures In connection with the filing of the Original Q3 2023 10-Q, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. At the time the Original Q3 2023 10-Q was filed on October 24, 2023, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2023 were effective at a reasonable assurance level. Subsequent to that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2023, the end of the period covered by this Form 10-Q/A, our disclosure controls and procedures were not effective because of the material weakness in internal control over financial reporting discussed below. ### Material Weakness in Internal Control Over Financial Reporting A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We did not design and maintain effective controls over the interim goodwill impairment test. Specifically, we did not design and maintain control activities over the accuracy of the manual translation of the base year forecast information used in the valuation model to calculate the reporting unit fair value. This material weakness resulted in an error to the goodwill balance and related impairment charge that resulted in the restatement of the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2023. Additionally, this material weakness could result in misstatements of the aforementioned accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. ### Remediation of Material Weakness Management is developing a remediation plan to address the material weakness discussed above. Remediation will not occur until the plan is implemented and there has been appropriate time for us to conclude through testing that the control operates effectively. ### Changes in Internal Control over Financial Reporting During the quarter covered by this report, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ### PART II. OTHER INFORMATION None. ## Risk factors As filed, 8,096 characters. The following discussion supplements the discussion of risk factors affecting the Company as set forth in Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022, and any subsequently filed Quarterly Reports on Form 10-Q, as well as the factors identified under “Cautionary Statement Regarding Forward-Looking Statements” at the end of Part I, Item 2 of this Form 10-Q/A, which could materially affect our business, financial condition or future results. The risks described in these reports are not the only risks facing TransUnion. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, and operating results. ***Economic and other conditions may adversely impact the valuation of our assets resulting in impairment charges that could have a material adverse impact on our results from operations.*** We have significant amounts of goodwill and intangible assets. On a regular basis, we evaluate our assets for impairment based on various factors, including actual operating results and expected trends of projected revenues, profitability and cash flows. As of September 30, 2023, our consolidated balance sheet included goodwill of $5,155 million (as restated) and other net intangibles of $3,546 million. We conduct a goodwill impairment test in the fourth quarter of each year, or more frequently if events or circumstances indicate that the carrying value of goodwill may be impaired. We have the option to first perform a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the qualitative analysis indicates that an impairment is more likely than not for any reporting unit, we perform a quantitative impairment test for that reporting unit. Our quantitative impairment test consists of a fair value calculation for each reporting unit that combines an income approach, using the discounted cash flow method, and a market approach, using the guideline public company method. The quantitative impairment test requires the application of a number of significant assumptions, including estimates of future revenue growth rates, EBITDA margins, discount rates, and market multiples. The projected future revenue growth rates and EBITDA margins, and the resulting projected cash flows of each reporting unit are based on historical experience and internal operating plans reviewed by management, extrapolated over the forecast period. Discount rates are determined using a weighted average cost of capital adjusted for risk factors specific to each reporting unit. We believe the assumptions that we use in our qualitative and quantitative analysis are reasonable and consistent with assumptions that would be used by other marketplace participants. However, such assumptions are inherently uncertain. During times of economic distress, declining demand and declining earnings could lead to us to have less favorable estimates of our future cash flows, discount rates or market multiples. Such changes could lead to lower estimated fair values of our reporting units, which could lead to a material impairment. In certain markets where we operate, macroeconomic conditions are unfavorable. If these unfavorable macroeconomic conditions persist longer than we currently expect, or are worse than we currently expect, our estimates of revenue growth rates and EBITDA margins would decline, which could lead to an impairment of goodwill. During the three months ended September 30, 2023, we identified a triggering event requiring an interim impairment assessment for our United Kingdom reporting unit, which resulted in a goodwill impairment of $414 million (as restated). The worsening macroeconomic conditions during the third quarter from inflationary pressures and rising interest rates increasingly impacted our business for the current quarter and the near-term outlook. Due to these factors, management now believes the U.K. recovery will take longer, and will be at a slower pace, than previously expected. As a result, we have revised our short-term and mid-term forecasts for revenue and EBITDA expectations for our United Kingdom reporting unit. These factors have particularly impacted the online-only FinTech lenders that represent the largest vertical within our United Kingdom reporting unit. These lenders have seen significant declines in their access to capital impacting their ability to lend and in some cases leading to bankruptcies. Any future reduction to our forecasts of our United Kingdom reporting unit may result in a further impairment that could have a material adverse effect on our business and financial results. Any change to the conclusion of our reporting units or the aggregation of components within our reporting units could result in a different outcome to our annual impairment test. See Part II, Item 7, “Management Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Goodwill” for a further information. ***Management has determined that our internal control over financial reporting and disclosure controls and procedures were not effective as of September 30, 2023. A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could impact our ability to accurately and timely report our financial results and other material disclosures or otherwise cause us to fail to meet our reporting obligations, which could have a material adverse effect on our operations, investor confidence in our business, and the trading price of our common stock.*** We determined that our internal control over financial reporting and disclosure controls and procedures were not effective as of September 30, 2023 as a result of the material weakness related to the interim goodwill impairment test, as discussed in Part I, Item 4 of this Form 10-Q/A. This material weakness has not been remediated and accordingly our internal control over financial reporting and disclosure controls and procedures remain ineffective. Management is actively engaged in the planning for, and implementation of, remediation efforts to address our material weakness but there can be no assurance that those efforts will be successful. Refer to Part I, Item 4 for further details of the material weakness and remediation efforts. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. As such, if we do not remediate this material weakness in a timely manner, or if additional material weaknesses in our internal control over financial reporting are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and our financial statements may contain material misstatements or omissions. Additionally, our internal control environment and remediation efforts do not provide absolute assurance with regard to timely detecting or preventing control deficiencies and thus do not insulate us from any failure to meet our financial reporting obligations. It is possible that additional control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified. Such a failure could require us to incur the expense of remediation, result in regulatory scrutiny, investigations or enforcement actions, cause investors to lose confidence in our reported financial condition and have a negative effect on the trading price of our common stock, lead to a default under our indebtedness, and otherwise have a material adverse effect on our business, financial condition, results of operations, and cash flows. Filed Jan 11, 2024. Source: SEC EDGAR, the filing index for accession 0001552033-24-000009. Last ingested by Listed: Nov 6, 2026, 13:32 ET. No prices; not investment advice.